Investors interested in Medical - Products stocks are likely familiar with Prestige Consumer Healthcare (PBH) and Stryker (SYK). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Prestige Consumer Healthcare is sporting a Zacks Rank of #2 (Buy), while Stryker has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that PBH likely has seen a stronger improvement to its earnings outlook than SYK has recently. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
PBH currently has a forward P/E ratio of 11.24, while SYK has a forward P/E of 21.44. We also note that PBH has a PEG ratio of 1.61. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. SYK currently has a PEG ratio of 2.05.
Another notable valuation metric for PBH is its P/B ratio of 1.27. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SYK has a P/B of 5.15.
These are just a few of the metrics contributing to PBH's Value grade of A and SYK's Value grade of C.
PBH sticks out from SYK in both our Zacks Rank and Style Scores models, so value investors will likely feel that PBH is the better option right now.
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Prestige Consumer Healthcare Inc. (PBH): Free Stock Analysis Report
Stryker Corporation (SYK): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).